In Spectrum Auction, Winners Are AT&T, Verizon and Openness

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In Spectrum Auction, Winners Are AT&T, Verizon and Openness

In a hotly contested auction that raised $19.6 billion for the U.S. government, Verizon walked away with the lion's share of the spoils, bidding $9.4 billion for a huge chunk of spectrum that includes the coveted C-block, which carries open-access stipulations. AT&T also won big, spending $6.6 billion for its own swath of spectrum.

Google did not win in its bid for the C-block, but the search giant may have won in a subtler way, as the FCC's openness regulations (which Google campaigned for) will ensure that any compatible device, such as the forthcoming "Google phones," will be able to work with any network that Verizon deploys on the C-block.

"In many respects, Google was in a 'can't lose' situation," says DerekBrown, an analyst at Cantor Fitzgerald. "What they – and many other internet companies – have really been focused on is getting their applications or services on mobile handsets."

The 700Mhz spectrum auction was one of the most significant auctions of wireless spectrum in years. Telecom experts point out that this band of spectrum, formerly used by UHF television signals, is particularly well suited to long-range broadband data transmissions, using emerging standards such as WiMax or "fourth-generation" cellular technologies like Verizon's Long Term Evolution (LTE). Those qualities made this auction particularly hotly contested. The FCC's open-access requirements raised the stakes even further, since most wireless operators' networks are currently closed to outside devices.

Verizon said in a statement that the company's bids include a nationwide spectrum footprint covering 298 million people, plus 102 smaller licenses for local markets covering 171 million people.

To comply with the FCC's anti-collusion rules, Verizon Wireless said it cannot comment further until the down payment deadline, which will be ten business days after the release of the Closing Public Notice, according to the FCC.

Now, with Google-backed Android phones expected to appear later this year andVerizon locked into the open-access rules, the wireless company will ultimately have no choice but to allow those phones on its network.

Still, Jeffrey Lindsay, an analyst at Bernstein Research, says the subject of openness remains controversial. As Wired.com has noted before, the interpretation of the open access attached the the C block is more than a little ambiguous.

"At a minimum it means Google applications cannot be kept off wireless devices operating in this spectrum," says Lindsay. "Whether or not Google can be charged for access to the devices, or if customers can be surcharged for using Google applications remains unclear for now."

As anyone who followed the proceedings leading up the Auction 73 knows, there's also no shortage of irony to the fact that it was Verizon Wireless who eventually emerged as the C-Block winner. Last September, the company actually sued the FCC, decrying the open access rules pertaining to, you guessed it, the C-Block of spectrum.

That set off a fierce battle of words between open-access proponents like Google and Frontline Wireless on the one hand and Verizon Wireless on the other. At one point, Frontline – whose board members including former FCC Chairman Reed Hundt and Janice Obuchowski, a former assistant secretary of commerce in charge of telecommunications policy – even asked the commission to ban Verizon from the auction.

Whatever Verizon and AT&T do with the spectrum they've just agreed to purchase, it will be years before their plans bear fruit.

"The prospect for more openness is potentially a meaningful victory for the long-term. I certainly don't think this has any near-term consequences," says Cantor Fitzgerald's Brown.